The Most Interesting New Gold ETF Since GLD

February 16, 2017

Solving Gold's Dollar Problem

Enter the SPDR Long Dollar Gold Trust (GLDW), the latest collaboration between State Street and the World Gold Council. GLDW is only the second ETF in the SPDR Gold Shares family, along with the aforementioned GLD.

Thanks to the strength of the brand, GLDW has been able to accumulate $15 million in assets in the three weeks since its launch (a respectable take, though nowhere near the record-shattering $1.5 billion GLD brought in during its first few weeks on the market back in 2004).

GLDW attempts to solve gold's dollar problem by taking a long position in the buck on top of an underlying long position in physical bullion. If the dollar rises, the ETF's currency position helps offset any potential losses in gold that may result.  

As the issuer website says, another way of looking at it is that GLDW gives investors exposure to gold as if "they had purchased it using a basket of six, non-US dollar currencies." Those six currencies are the same ones in the U.S. Dollar Index: the euro (EUR), Japanese yen (JPY), the British pound (GBP), the Canadian dollar (CAD), the Swedish krona (SEK) and the Swiss franc (CHF).

Not The First Of Its Kind

GLDW isn't the first ETF to have this "gold denominated in foreign currencies" theme. The AdvisorShares Gartman Gold/Yen ETF (GYEN) and the AdvisorShares Gartman Gold/EURO ETF (GEUR), both launched in 2014, are two funds that apply a similar strategy. However, GYEN and GEUR go long the dollar against only the yen and euro, respectively. GLDW is the first to use a basket of currencies for its long-dollar exposure. 

 

Ticker Expense Ratio
IAU 0.25%
GLD 0.40%
GLDW 0.50%
GYEN 0.65%
GEUR 0.65%

 

In the three years since their launch, the AdvisorShares products haven't gained that much traction. They have a combined $35 million in assets under management currently. Perhaps GLDW's name recognition will help it become more successful.

Indeed, from a performance perspective, there's certainly reason for investors to take a closer look at these types of products. Since their inception in February 2014―just a few months before the dollar bull market began in earnest―GYEN gained 3%, while GEUR gained 18.8%, compared with a loss of 5.7% for GLD in the same time frame.

Of course, GLDW wasn't around back then. But its underlying index, the Solactive GLD Long Dollar Gold Index, would have gained 21.1% in the period, according to backtested data. Moreover, using the same backtested data, the Solactive index is only down 12.5% from what would be its 2011 all-time high, much less than the 37% for GLD.

 

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